CA 2006 - Company Articles Health Check Service - from £49.00+vat

Benefits of Updating the Company's Constitution after 1 October 2009

All companies should review their Articles to assess whether any changes need to be made to them in light of the final implementation of the Companies Act 2006 in October 2009. It is the review that is important, the understanding of where the company stands in relation to the new legislation and when the existing Articles may become a hindrance in the smooth management of the company.

Many will find that they are fine and of course, an existing company could continue operating under its existing constitution, with certain provisions contained in the memorandum of association now being treated as provisions which will form part of the articles of association. These existing articles will remain in force provided that they are not overridden by any provisions contained within the 2006 Act.

This is more likely the older the constitution of the company is. Any articles of association based upon Table A before 1 October 2007 will have a number of its provisions that have since been overridden by the 2006 Act. For example, provisions relating to members’ rights to appoint proxies and situations where a director has a conflict of interest with the company. Both of these provisions are likely to be incorrect and will have to be updated. Some older articles will include appointment of auditors as standard and explicit provisions relating to the company secretary.

The 2006 Act has given rise to new model articles of association, which are drafted in modern plain English, making them easier to understand and apply in general business practices. They have been designed with a ‘think small’ first approach with the needs of the smaller owner managed business in mind. They are therefore shorter and more easily understood by the typical small or medium sized company director or shareholder.

Updating the company constitution can bring material benefits to the company, allowing the company to take advantage of some of the simplifications the 2006 Act allows. It is with in mind that we offer our Companies Act health check, where we will undertake a review of the company’s constitution comparing against the new 2006 Act and produce a report detailing the inconsistencies and weaknesses, then offering recommendations as to the solutions and benefits.

BTC New Articles of Association.

The BTC CA2006 articles offer many advantages as compared to those formed under Table A of the 1985 Act, making the administration of the company not only easier to manage but also to understand. In particular there is simplification for;

• Share transfers – clear procedures for directors’ concerning share transfers
• Transmission of shares – easy to understand rules for the transmission of shares by reason of the holders’ death or bankruptcy.
• Payment of dividends – simple procedures for the declaration and payment of dividends, non-cash distributions and waivers.
• No provision for the appointment of a Company secretary – this allows any private company to exercise the exemption from having to appoint a secretary (CA2006 S270(1)).
• Audit exemption – no requirement for the company to appoint auditors for auditing the company’s annual accounts (subject to statutory audit exemption requirements).

In addition by adopting the new articles they;

• Give a clear reminder to directors regarding their statutory obligations regarding conflicts of interest between personal and company contracts and transactions.
• Remove any requirement for a director to retire by rotation.
• Strengthen the scope of indemnities given to the directors of the company and the power to purchase and maintain insurances for any relevant loss.

Between the 2006 Act and the 2009 Shareholders Rights Directive, the rules and requirements for all companies calling and holding meetings have changed. Adopting new articles will;

• Remove any requirement to hold an AGM.
• Allow for electronic meetings and communications and for the transmission of documents and information by electronic means. This saves time and resources and allows for directors and members to take part in meetings they were unable to attend in person.
• Extend shareholders rights as to the appointment of proxies.
• Remove any outdated restrictions concerning the rights of directors or members who situated outside the UK to receive notice of meetings.

Two sections of the redundant memorandum of association will be deemed to be treated as part of the articles; these deserve very close attention;

• The objects – The company’s current objects will under S28 and S31(1) become restrictions upon the company’s activities, this is simply overcome by adoption of the new articles under which the objects of a company are deemed to be unrestricted.

• Authorised share capital – With the abolition of all authorised share capital these will be treated within the articles as a cap on the authority of directors to allot new shares. Under the 2006 Act this authority is unlimited when allotting ordinary shares. Once again this restriction may simply be removed by adopting the new articles

BTC Company Articles health check

To ensure your company is compliant with new regulations and that you are getting the most benefit from them, BTC staff will review your current memorandum and articles of association and report;

• Areas in need of revision.
• Recommendations as to your options.
• Easy to understand suggestions for any updating and amendments that are required, and
• Clear information and cost regarding appropriate works that may be undertaken.

For our BTC account holders the price is £49.00 plus vat per company, for non account holders on a one off basis the price is £99.00 plus vat per company. contact us today to discuss or arrange this service.